Talk of grain corridors raises questions for Black Sea trade

25 May 2022 | Masha Belikova

Talk of a possible unblocking of Ukrainian deep sea water ports intensified Wednesday after Russia said it is ready to discuss permitting ships carrying grain to leave Ukraine.

But market participants remained skeptical that this will transpire.

According to Russian news agency Interfax, Deputy Foreign Minister Andrei Rudenko said Russia is open to ensuring the opening of humanitarian corridors on certain conditions.

“We have repeatedly spoken out on this subject that solving the food problem requires a comprehensive approach, including the removal of sanctions restrictions that have been imposed on Russian exports and financial transactions,” Rudenko said.

“It also requires Ukraine to clear all ports where ships are docked, and Russia is ready to provide the necessary humanitarian passage, which it does every day,” he also said.

Global grain and oilseed prices have soared to record highs on global markets since Russia invaded Ukraine late February, effectively blocking exports from Ukrainian ports.

Ukraine supplies some 10% of the world’s wheat, 13% of its barley, 15% of its corn and more than half of its sunflower oil.

Rudenko’s statement comes after Russian authorities said they had opened the port at Mariupol, which is now under Russian control, and had approved the foreign vessels that have been stuck there to leave.

According to Marine Traffic, however, only one foreign vessel is still in Mariupol. The other vessel that had been due to move wheat from Ukraine to Turkey has not been on the radar for the last 85 days; it is not clear if the crew is still there given that the city has been subjected to heavy shelling since the war started.

Market sources were unconvinced by Rudenko’s statement, noting that the Russian authorities said they are only ready to discuss green corridors for grain exports if the sea is cleared of mines.

Clearing mines would indeed make it easier for vessels to leave Ukraine but it would also open up access to inland Ukraine for Russian troops.

“I would be very surprised if they themselves open the ports without forceful influence on them,” one trader based in Ukraine said.

“In the very first days of the war, I immediately realized that this was their main lever of pressure. I can't even imagine how they would give it up,” he added.

Another trader could not see how exports could resume, he said, because the question of safety and compliance with agreements remains unanswered.

Still, milling wheat futures fell sharply on open at Euronext exchange in Paris. Market sources dismissed this as speculative moves, however.

“Honestly, it's speculation. Talks about a green corridor, the release of vessels in Mariupol - but how much can it really help the export? It's hopes, nothing firm,” one Europe-based trader said.

September milling wheat was trading at €404.75/mt as of 1330 CET, down by €5.75 from Tuesday’s close, while December dipped below €400/mt to trade at €397.50/mt as of the same time.

“To me, nothing new, but seems this is making the market move,” a second Europe-based trader added.

Euronext rapeseed futures were also down on the day, with the front August contract hitting a low of €800/mt, €16.75/mt lower than Tuesday’s settlement.  

The August contract was trading at €805/mt as of just before 1800 CET, while November was down €11/mt at €799/mt.